Homebuilders are getting back to work. Is that good news for the housing market?

In June, the number of new houses being built unexpectedly jumped from the month before. The Census Department recently reported that June also showed an increase  a small increase, but one nonetheless  in the amount of money going toward residential construction. Housing permits, which also speak to builder confidence, are creeping up too. As an Aug. 10 report from Oppenheimer Asset Management put it, "this part of the housing market appears to be finding its footing." (See pictures of a modernist house.)

The question, though, is whether it's good to see more houses come onto the market. Rampant building was one of the things that helped foster the real estate bubble, after all. Are the same companies that didn't know when to stop prematurely hopping back in? The number of existing homes for sale has fallen over the past year, but we still have a 9.4-month supply on the market  nearly double the rate that's desirable. With desperate homeowners trying to sell, and foreclosures still piling up, are more houses what we need? (See pictures of high-end homes that won't sell.)

The good news is that the top-line numbers about new houses are a little misleading. Yes, new-home activity is picking up, but that's partly because a lot of the excess inventory from the boom has been cleared out, and builders are now looking at emptier coffers than they have in a long while. Since the end of 2007, builders have been selling more houses than they've been putting up. In the first three months of 2009, there were 52,000 single-family homes started. Over the same period of time, 87,000 were sold. At the current rate of sale, all the new homes on the market would be gone in 8.8 months. That's still above a more normal four- to six-month supply  but taking into account how long it takes to ramp up new construction, it's not necessarily an illogical time to start building. Consider how quickly that excess inventory has been burned off: as recently as this past January, there was a 12.4-month supply of new houses.

That's why building is starting to pick up in certain pockets of the country. In central Texas, to take an example, D.R. Horton, one of the nation's largest homebuilders, is planning to build upward of 700 houses without buyers lined up. Such speculative houses largely went away during the real estate bust, but for builders trying to stay ahead of growing demand, they are starting to reappear. (See 25 people to blame for the financial crisis.)

The only worrisome part about that is what happens if demand then falters. Nationwide, we've seen an uptick in the number of people buying houses  both existing homes and new ones. But still, according to the Oppenheimer report, "the demand side of the equation is less than impressive." Nearly a third of existing-home sales are currently to first-time homebuyers  a wildly disproportionate amount. What happens to those buyers once the $8,000 first-time homebuyer tax credit evaporates at the end of this year? Even with home prices a steal in many parts of the country, whether demand will hold up  especially with the countervailing force of tighter credit  is a real question mark. (Read: "Home Sales Perk Up, but Expensive Houses Languish.")

If it doesn't, then all the math, including on new homes being built, will have to change.